UPDATE 2-Canada proposes splitting pot tax, draws ire from Ontario

Reuters Staff

(Adds reaction from Ontario, details, share prices)

By Leah Schnurr

OTTAWA Nov 10 (Reuters) - Canada's federal government
proposed on Friday that it split equally the income from excise
taxes on recreational marijuana with the provinces where it will
be sold when it is legalized next year, drawing criticism from
Ontario.

The federal government said it wants an excise tax on all
cannabis products of C$1 (79 cents) per gram (0.04 ounce), or 10
percent of the retail price, whichever is higher. Excise taxes
are paid by manufacturers.

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Consumers would be levied federal and provincial sales
taxes, which could boost the final price of marijuana by up to
15 percent, depending on the province.

"The federal proposal to share revenue 50-50 is not
reasonable or sufficient," said Jessica Martin, spokeswoman for
Ontario Finance Minister Charles Sousa. "The transition to a
legalized and regulated system will come with significant
incremental costs to the province."

Prime Minister Justin Trudeau's Liberal government wants to
allow recreational marijuana across the entire country by July
2018, making it the first Group of Seven country to do so. But
it has left many of the details, including how it will be sold,
up to the provinces.

Federal and provincial authorities want the total cost of a
cannabis product to be low enough to discourage people from the
illegal market.

Marijuana producers' shares rose as the plan was similar to
one Trudeau outlined last month. Canopy Growth Co
rose 2.7 percent to C$19.88, while Aphria Inc
was up 3.7 percent at C$8.49.

Some provinces have expressed concern about how much it will
cost to implement and supervise the new market, laying the
groundwork for a potential conflict between the two levels of
government.

Ontario, Canada's most populous province, said each province
needs to have the flexibility to support its own distribution
system.

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Canada's federal and provincial finance ministers are set to
discuss legalization of pot at a meeting next month in Ottawa.

Member of Parliament Bill Blair, the government's point
person on marijuana legalization, said total tax revenue could
be as much as around C$1 billion, though he said that was a very
high estimate and will depend on how big the market is.

Trudeau promised in his 2015 election campaign to legalize
marijuana, saying it would keep the drug out of the hands of
underage users and reduce related crime.

However, opposition has been brewing among some in the
Canadian Senate, which could put quick passage of the law in
jeopardy.